A commercial property owner has lost a policy dispute triggered when its insurer declined to renew cover after inadvertently accepting the risk for a laundromat in one of its shop sites.

The complainant, who bought through a broker, amended the policy mid-term on December 1 2022 to include the laundromat.

Allianz accepted the risk before later realising a mistake had been made because it does not insure laundromats. It agreed to honour the policy for the term, while not offering renewal at expiry.

The complainant said it offered a five-year lease to the laundromat based on the insurer’s acceptance of the risk and sought compensation for losses it said would result from the error. It argued if the insurer had refused the risk, it probably would not have offered the lease.

“There is a dispute as to whether the insurer or the complainant’s broker made an error,” an Australian Financial Complaints Authority ombudsman says in a dispute ruling. “However, for the purpose of this dispute, I will say the insurer made an error. This is because even on that basis, this does not give the complainant an entitlement to compensation.”

The insurer honoured its promise to accept the laundromat as a risk during the period of insurance and it was not reasonable for the complainant to assume the same arrangements would continue on renewal, the decision says.

“There is no information to show the insurer represented it would continue to insure the complainant on the same terms for any subsequent renewal. There was no misleading conduct here,” AFCA says.

“These types of policies are annual periods renewable at the discretion of both parties. That is, at renewal, the insurer had the right to either go off risk, change the premium or the terms, as long as it gave the requisite notice, which it did here.”

The decision is available here.

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